For a firm with a focus on legal-tech and innovative legal solutions, being asked to “show us what you can do” is a challenge we love to hear. So we were delighted when KPMG Deal Advisory asked us to show them how we could deploy our AI-powered review tool in practice.
One of the clients of KPMG was looking to divest part of its business. For this, they needed to work through close to 1000 unstructured contracts to identify change of control clauses that could impact the divestment process. In such situation, one aspect of building buyer confidence is to perform a detailed analysis of contracts. This ensures they understand any additional obligations to counterparties that might arise as a result of the change of ownership. Could Legadex, employing AI, identify every contract that contained a change of control clause? Could we flag exactly where to find it in the document? Could we handle documents in multiple languages? And could we do all this faster, more accurately and at less cost than a traditional manual review?
Experience with AI since 2012
Legadex has been using AI since 2012, primarily for contract analysis, contract review and risk and compliance reviews. We offer it as a due diligence service and as a support for routine contract analysis and review. The use of the latest AI capabilities takes our document review to an entirely new level, with superior visualisation and reporting. Time savings of 75% are easily achievable on a legal contract review and due diligence project.
Why we use AI for contract review
Here are a few of the features that support our review process:
- Supervised and unsupervised machine learning enables Legadex to read and form an understanding of legal data – the software can search on both an exact phrase and contextually to recognise small variations in wording.
- AI software can rapidly surface and flag key information like datapoints, contract clauses and anomalies. This enables us to go straight to the pain points and skip the rest.
- Our AI tooling is language-agnostic – it can identify almost every language in a batch of documents. Dataset visualisations make it easy to identify different document types, clauses, anomalies, currencies, languages and regions and show it in a comprehensive dashboard.
The platform features an intuitive, easy-to-use interface and simple drag-and-drop uploading.
This all looks good on paper, but what about the real world, where the rubber meets the road?
For our client, the key goals were to 1), get an accurate overview of how many change of control clauses were included in the batch of contracts, and 2), to understand the impact of these change of control clauses on the planned separation. Most of the contracts were in English, but a sizeable number were in German, French, Spanish and Italian. How could these be reviewed and reported efficiently? Could we provide a complete report containing the reviewed contracts and change of control clauses that had been identified in all languages?
Manual work = time consuming
Normally, a manual search begins with someone going through the contracts to identify what languages are involved. Next, they are sent to local lawyers to review those contracts that are in their language or languages. These lawyers identify any change of control clauses, flag them, assess their impact and report back. Let’s say 30 minutes for a 15-page contract. Multiply by 1000 (the number of contracts) and you come to 500 hours. And that’s not including the time to prepare the contracts for analysis, administration, et cetera, et cetera. Question to us: how can AI help to accelerate this process given the various languages involved? So how did we do, and how did we do it?
Step 1: AI upload and analysis
First, the client gave us the documents they wanted us to search. Next, we uploaded them into our AI platform. Actually, “uploaded” sells it a bit short because the upload is also the analysis. Our solution is already pre-trained to find change of control clauses in a number of languages, including English and Dutch, and we trained it in the other languages involved as part of the project. In less than an hour we:
- Identified the exact number of documents to be checked
- Filtered the documents per language
- Identified how many and which types of English language contracts contained a change of control clause and extracted the relevant clause
- Extracted some nice-to-knows like duration of the contracts, jurisdiction and overview of contracting parties.
Step 2: Workflow for verification and training
After completing step 1, we divided the contracts and findings into batches – by language – and assigned the batches to a team member for further verification and analysis. In this stage, we also provided some additional training to the system to enhance the level of automatic recognition of the clauses in German, French, Spanish and Italian. To ensure we weren’t missing anything, we did second review checks on the automated results.
All done in a short timeframe at competitive cost
Legadex successfully analysed close to 1000 contracts in a very short timeframe, and with a reduction in time and cost of more than 75% compared to a traditional contract review.
KPMG and the client were very happy with the results and we showed what we can do. A win all round.